Friday, March 18, 2011

3/18 Weekly Commentary

On Friday I came into the session long 6% SSO and sold 2% before the open for 50.04.  The market rallied a bit more then went into a long sideways.  I stopped out 4% SSO at 49.57 and am going into the weekend flat all markets.  There are 600,000 spent fuel rods on the Fukishima site, every rod used for the past 40 years for these 6 reactors, 4 spent fuel pools in trouble, along with 3 reactors.  I don't trust TEPCO enough to get pumps working, so if they do the market will spike upward on Monday.
I'm publishing an extended view across markets due to the impending turn of I1.  This will be posted in 2 parts, this commentary and an Addendum.
The wave count is 3 down from the Feb highs and (so far) 3 up from Wednesday's lows.  EWI says downside is imminent.  I1 is up through next Friday so I can't short. 

The dollar is getting pasted and it's been awhile since I posted on it.  I have not been using it to hedge long stocks since bonds bottomed and became more viable.  Both show reverse correlation with the stock market.  My dollar count shows we are in an ending diagonal closing in on the low last November of 75.24.  This should mark Minor 2 low.
 Within the final Minuette wave the count is:

When I1 peaks the dollar should start to recover and gain strength.  I'll go long the dollar on the completion of the Minuette 5 at around 75.24, basis June futures.  Because the June futures carry a fair time premium at this point the futures might not make it quite to 75.25.  Hopefully the conclusion of the wave pattern will coincide with the I1 top, otherwise I may be entering earlier than Friday.  As can be seen in the dollar's sentiment gauge below this long dollar trade will only be good through the first week of April.

Bonds are another way to position against the stock market when I1 peaks.  Interestingly, long bond trade is only good through the first week of April, just like the dollar.  I held long bond up until Wednesday as a hedge to long stock ETFs, but sold them on evidence of the stock market bottom.  If the stock market does manage to rally into the I1 peak I should be able to buy the bonds lower.

So both the dollar and bonds have a peak late in the 1st week of April.  This is also the same timeframe as a corresponding bottom in I1.  I will be short the stock market from March 25 near the close through the first week of April.  At the same time I'll be long dollar and long bonds. 

Finally, I know that a lot of people reading this blog detest the existing financial and fiscal policies as much as I do.  The Fed has pre-announced there will be no QE3, so our day is coming...soon.


  1. good work, very clear to understand

  2. Cheers for the commentary, Steve, enjoy your weekend.

  3. When did the Fed announce no QE3?

    (My guess is that what this really means is No QE3 NOW. A few months down the road...? That's anybody's guess.)